Chainlink Price Feeds Fortify Term Finance’s Loan Infrastructure
Term Finance, the DeFi protocol known for facilitating fixed-term loans via on-chain auctions, has recently incorporated Chainlink Price Feeds on the Ethereum mainnet. By adopting this cutting-edge decentralized oracle network, Term Finance can now tap into secure, high-fidelity price data, enabling a more transparent overview of collateral values for borrowers. Consequently, this empowers lenders with more confidence regarding borrower financial stability while simultaneously granting borrowers the data necessary to oversee their collateral’s status effectively.
Key Chainlink Price Feeds in Use
The early stages of this collaboration will leverage several Chainlink Price Feeds, namely:
- wstETH/ETH
- ETH/USD
- wBTC/BTC
- BTC/USD
- USDC/USD
- USDT/USD
- DAI/USD
Why Chainlink?
Chainlink’s oracle infrastructure was the top choice for Term Finance because of its ease of integration and a stellar track record. Notably, Chainlink has been instrumental in safeguarding top-tier DeFi protocols that manage billions in smart contract value. Its resilience is commendable, especially during unforeseen incidents like exchange unavailability, sudden market plunges, or potential data-tampering threats.
Understanding Term Finance’s Offering
The essence of Term Finance lies in its capability to offer fixed-rate lending tailored for the Web3 community. This is achieved by effectively pairing borrowers and lenders through a unique term auction smart contract. The procedure can be summarized as:
- Bidding Process: Borrowers bid for loans while lenders provide their asking rates.
- Rate Selection: An algorithm in the term auction contract deduces a fixed rate that balances the market. Lenders quoting below this rate can lend, and borrowers bidding above this rate can access loans at that rate.
- Position Monitoring: Once matched, Term Finance equips both parties with tools to keep a watchful eye on their collateral and standing.
- Loan Maturity: Upon maturity, borrowers remit the principal and the interest to reclaim their collateral.
To ensure the transparent monitoring of collateral value, Term Finance requires a consistent inflow of up-to-date asset prices delivered directly on-chain. These prices must represent a comprehensive average across all trading platforms. Hence, an oracle network, such as Chainlink’s, becomes indispensable to fetch and integrate this external price data.
Unique Features of Chainlink Price Feeds
Chainlink’s Price Feeds come packed with distinct advantages:
- Superior Data Quality: Sourced from top-tier data aggregators, Chainlink offers a composite of prices from a multitude of exchanges, adjusted for volume, and purged of anomalies and wash trades.
- Trusted Node Operators: Chainlink Price Feeds benefit from the backing of Sybil-resistant oracle nodes managed by reputed blockchain teams and data specialists. Their historical performance speaks volumes of their reliability.
- Robust Decentralization: The data sources, oracle nodes, and the entire oracle network of Chainlink are decentralized, bolstering resistance against any potential interruptions or manipulations.
- Transparent Reputation Mechanism: Chainlink boasts an extensive on-chain monitoring system and a reputation framework, enabling users to assess the real-time and historical performance of node operators.
Billy Welch, the co-founder of Term Labs, underscored the importance of this collaboration, stating, “For a premium lending and borrowing experience, one needs the pinnacle of price data infrastructure. This drove our decision to align with Chainlink Price Feeds.”
